Author Topic: Tell us about your first rental property!  (Read 6403 times)

ioseftavi

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Tell us about your first rental property!
« on: January 14, 2015, 09:15:31 AM »
Hi all. 

My wife and I have mentioned in our journal (and spoken via PM with a few forum members) that we're looking to buy our first rental property in 2015. 

One of the things that irks me a bit about real estate is the near-deafening amount of well-intentioned advice coming from people who have never owned rental property, have never seriously examined rental property as an investment possibility, and never intend to!  I think maybe it's because so many homeowners feel that owning a primary residence means they're equipped to talk about real estate? 

So: I'd like to hear from some MMMers who own, or have owned, rental property.  I'd like to get a rough idea of how some of your first transactions went, in order to get a more objective look at first transactions from people who have actually owned rental properties.

So tell me about your first property!  Here's the stuff I'm curious about (if you're willing to share - I understand if you want to keep certain parts private).

Transaction details (price / financing / closing costs / repairs / rent)?

Type of property / Yr of purchase / geographic market?

Deliberate purchase of a rental property, or "accidental landlord"?

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?

Self managed or get a property manager?

Do you still own the property?

Overall, how'd you do?

Are you still involved in real estate?

Any advice you want to pass on to newbies?

geekette

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Re: Tell us about your first rental property!
« Reply #1 on: January 14, 2015, 10:16:11 AM »
Hahahaha!  You don't want to hear about our first (and LAST EVER) rental property!  But I suppose it did turn out okay in the end.  From a distance.  A distance of many years...

We were accidental landlords.  We'd bought a townhouse in '86 shortly after we married, right near NCSU in Raleigh.  It was about $70k, and the interest rate was 10.5% (and that was a good rate!) and our payment was $775/month, plus HOA fees of about $90.  In '91, my DH accepted a contract job in Austin, TX, so we figured we'd sell the place, save a ton of money from the outrageously high rate the contract job paid, and buy a house when we moved back home after a year.  The second part worked, but the first, not so much.

We knew we'd never get near $900/month to cover our costs, but we were bleeding money anyway, so after several months on the market, we contracted with a property manager who got us tenants.  BAD tenants.  University students.  Late pays, partial pays, complaints from neighbors about their talking car ("please step away from the car" in a loud voice throughout the night when no one was around).  They finally moved out, but not until after tearing out all the closet inserts, tearing down lighting, leaving rotting food dumped in the back yard.  And then they sued US!  That's right, the property manager didn't report them correctly to the credit agency, so we got sued.  It didn't matter that one of the guys had used his brother's SSN (because his credit was already ruined), or that they really were that late with rent and such.  They had a university supplied free lawyer whose purpose was to get students out of their leases.  Well, they're someone else's problem now.

The management company did manage to do one thing right before we fired them.  They found the next tenants, who stayed 17 years.  Sure, they were late a few times (but always paid), and they did stupid tenant things like not tell us that tiles had come off the walls in one bath until the same thing happened in the second bath (they stayed in a hotel until we could get them both quickly fixed).  The water heater broke on Christmas Eve or the 4th of July (actually both, I think, over the years).  Since we moved back into the area shortly after they moved in, I was "lucky" enough to be able to do, or at least coordinate, most of the work.  When something happened while we were on vacation, my Dad was close by to help as well.

Many, many times I tried to get these stable tenants to buy the townhouse.  By then, interest rates were down, and we'd gradually, but barely, raised the rent to $820/month (it cash flowed at that point because we'd refinanced, and eventually paid it off).  The wife died.  He said he'd move, but never did.  My MIL died, I said we'd sell it, but never did.  Finally in '09 he announced that he was getting remarried and moving out.  And he did.

$11k of renovations later (practically brand new inside), we sold it quickly for $110k.  Happiest day of my life.  Never again.

I'm sure it's a good idea for many people, just not us.  I think you have to have a different personality to be a landlord.  And you can't mind other people's filth.  After 17 years, there was enough filth in that place (behind the washer, behind the fridge, IN the fridge) to make me gag.  He'd been a bachelor for many of those years, and it showed.  He said "keep the deposit".  We did.


ioseftavi

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Re: Tell us about your first rental property!
« Reply #2 on: January 14, 2015, 10:26:51 AM »
Thanks, geekette!  Nice to hear about your experience - even if it sounds like it was crappy at some times!  I appreciate you taking the time to tell the tale.

I can't believe what interest rates were like in the 80's - hearing from investors then, I imagine it was very very hard to make properties cashflow with those payments.  Congrats on selling it!

Also: now I want a talking car.  It will complete my 'robocop' outfit.

JasonK

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Re: Tell us about your first rental property!
« Reply #3 on: January 14, 2015, 11:17:13 AM »
Well, luckily my first rental property was a home run.  Not sure how much this will help as it was in the Dallas market, purchased in mid 2012, but here are the details:

3/2 brick home built in the 70's, paid $65K cash.  Bank foreclosure, had been vacant for >1 year.  $25K in rehab including foundation repair, new paint inside, scraping of popcorn ceilings, new hot water heater, appliances, bit of flooring, and general cleanup.  But did not require much work in either the kitchen or the two bathrooms.  Total investment $90K

Rented for $1495 initially on a three year lease.  Tenants just agreed to do a 2 year extension (I did not raise the rent).  Tenants both work, good credit except a bankruptcy they had several years ago.  They're trying to rebuild their credit and wanted to lock in the rate, hence their desire to sign a long term lease.

Use www.erentpayment.com to collect all rents - no checks.  Love this service.
Use www.tenantbackgroundcheck.com to get credit report, etc.  Some services won't give you the full credit report, but this one will

Manage property myself, found a good electrician / plumber / handyman on angieslist and respond to any issues quickly.  Had very few since the house was freshly rehabbed.

Use all of the standard Texas realtor forms (lease, property condition report, application, pet addendum, etc) - just got them online.  Assume you will have similar forms in your state.

Bought two more rent houses shortly after this one and retired a year ago on the income at 44 years old.  The other two stories are virtually identical (cost basis $90K-$95K), but they rent for $1395. 

Hope that helps~


JasonK

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Re: Tell us about your first rental property!
« Reply #4 on: January 14, 2015, 11:20:23 AM »
Sorry, www.tenantbackgroundsearch.com, not tenantbackgroundcheck


ioseftavi

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Re: Tell us about your first rental property!
« Reply #5 on: January 14, 2015, 11:59:53 AM »
Well, luckily my first rental property was a home run.  Not sure how much this will help as it was in the Dallas market, purchased in mid 2012, but here are the details...

Jason, this sounds awesome.  Congrats on your successful properties, as well as your early retirement!

Follow-up questions - did you use leverage?  It's clear that you bought the first one using cash, but the next two I'm not clear on.

Also, how did you decide that you were going to own property, and pick your market?  It sounds like both were fairly deliberate choices on your part?

waltworks

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Re: Tell us about your first rental property!
« Reply #6 on: January 14, 2015, 02:20:47 PM »
We bought a condo in CO for $170k in, let me see... 2009. We lived there for 3 years (while my wife finished grad school) and did some minimal upgrades (as well as getting $10k worth of solar panels, which was stupid). Paid it off in 2011. When we moved to UT, we rented it for $1350/mo (a bit under market rate) to friends. That turned out to be a mediocre decision - we saved on the management costs since they were good folks and took care of the place, but maintenance and HOA cost enough that we were only cash flowing about $700/month, and in the meantime the value of the condo skyrocketed.

We thought about hiring a management company and raising rent (probably $1700-1800 would be achievable now) but elected to sell it instead for $270k. It would have been $280k but appraisers couldn't find comps with solar panels (!) so we ended up in an odd low-appraisal nightmare situation and took the less stressful way out by just conceding to sell at appraised value. But I think we netted $82k in profit (didn't pay any tax on it as we had used it as a primary residence) from the sale as well as maybe $15k in cash flow in the 2 years we rented it. So a total profit of about $100k, give or take a bit.

We definitely got lucky/bought at the right time on that one. If held as a rental at market rate, it would have been yielding maybe $12k/year. We probably could have held on longer (prices have continued to climb) but hindsight is 20/20 and we felt like it was time to be done with it.

-W

Bobberth

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Re: Tell us about your first rental property!
« Reply #7 on: January 14, 2015, 02:35:55 PM »
I'm sitting at 11 rentals with a should have an accepted contract on #12 (Fannie Mae taking a week+ to sign off on me accepting their counter of larger EM after agreeing on price???) and an owner signed contract for a duplex short sale for #'s 13 & 14 right now.  All of mine have been with the purpose of being a landlord and are located in south St. Louis City.  My cheapest rental was #2 (March 2009) at $11k and my most expensive was #11 (March 2014) at $48k.  Most were in the $25k-$35k range.  I manage all of the properties myself.

My first was purchased Dec 1 2008.  It's a 2 bed, 1 bath brick house built in the 1890s.  It had been on the market for a long time and was listed for $24k and I bought it for $18k.  It's basically a shoe box-a red rectangle of a house with nothing interesting or decorative about the outside of it.  The only picture online was of the plain red front of the house but my agent saw the previous listing in the MLS history and that it was rehabbed and sold previously for $80k so we went to see it.  The water pipes were stolen along with the AC unit and the furnace but everything else had been previously rehabbed and was still in great shape.  It even had the appliances still there.  I used some high priced providers and put about $5k into getting it rent ready and have rented it for $595 with the current tenant being there for 3.5 years now.  It's not the best lay out but it's a house and offers a lot of space for the tenant's money and pulls in the rent for me.  There's a partially disabled lady in her 60s living there now.  I figure she will stay there until she is taken to an assisted living facility or carried out on a stretcher. 

A word of caution that I like to pass on to newbies if you are thinking about becoming a landlord.  I never felt like I was making any money until rental number 6 came along.  I put all of the rent into an account and paid all expenses from that account.  That account never seemed to grow with insurance, taxes, small repairs etc constantly depleting when I only had just a couple of rentals.  Part of that might have been my continual purchase & rehab of new properties and I took a little break after #6 and was finally able to see the account value go up then.  But if you think about it, some people want to make $100/door/month after expenses.  That is only $1200/year so you're not going to get instantly rich.  Rentals are a nice, slow way to accumulate wealth though.

Fishingmn

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Re: Tell us about your first rental property!
« Reply #8 on: January 14, 2015, 03:33:44 PM »
Transaction details (price / financing / closing costs / repairs / rent)?  Bought 12/14/2010 for $100,000 even. All cash (helped me beat out $110,000 FHA offer), needed about $2k in repairs between paint and cleaning but I earned that much in commission as a Realtor. Closing costs were minimal since it was cash - $400 or so. First rent was $1,150. Initial return was about 8% - one of my worst purchases from that standpoint.

Type of property / Yr of purchase / geographic market? It is a townhouse built in 2005. 2 bed, 3 bath, 2 car garage. Pretty nice place. The property sold new in 2005 for $200,000 so I got it for 1/2 price. It's in the south suburbs of the Twin Cities.

Deliberate purchase of a rental property, or "accidental landlord"? Deliberate

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)? Since it was cash offer yes. Very little repairs although I did add a water softener. Never had any vacancy there in 4+ years. It has had 3 different tenants but it fills fast with no vacancy period.

Self managed or get a property manager? Self manage
 
Do you still own the property? Yes

Overall, how'd you do? Currently rents for $1,270 so the ROI is now close to 10%/year. In addition, prices have rebounded and similar units now sell for $155k.

Are you still involved in real estate? Yes, 11 rentals. These will provide a big chunk of our retirement income in 2 years when DW plans to quit. I'm still a Realtor as well.

Any advice you want to pass on to newbies? Spend time at biggerpockets.com

Malaysia41

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Re: Tell us about your first rental property!
« Reply #9 on: January 14, 2015, 09:52:12 PM »
Our cautionary tale is in my journal:

Part 1 - The saga begins

Les Apartements - Part Deux

L'appartamento, terza parte

It's been, as they say, a roller coaster ride.
Last one to panic wins!

My Rohingya Refugee Charity (now Tax Exempt!)

I'm an enemy of POTUS, VPOTUS, and the privately funded political system that inflicted them upon us.

ioseftavi

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Re: Tell us about your first rental property!
« Reply #10 on: January 15, 2015, 08:44:24 AM »
Our cautionary tale is in my journal:

Part 1 - The saga begins

Les Apartements - Part Deux

L'appartamento, terza parte

It's been, as they say, a roller coaster ride.

This is a great story, Malaysia!  I love that your initial investment wasn't smooth or perfectly planned out with regards to numbers, but through good management and capital allocation you managed to turn it around through a very difficult period.  And your property manager, despite potential excess "handyman" work, sounds like she did a really great job with the process!  Congrats on the turnaround!

Shandi76

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Re: Tell us about your first rental property!
« Reply #11 on: February 08, 2015, 03:03:41 AM »
I was an "unplannedlord" as Sarah Beeny would say. I bought my first property in 2001 at the age of 24. It was a 1 bed Victorian flat (apartment) in a poorer area of a small UK city that was still a buyer's market so I paid only £23.5k. So I got it cheap and aggressively paid down the mortgage. Five years later I took a job which came with free accommodation. My flat hadn't gone up in value much and didn't cost much to keep, so I rented it out to a friend of a friend. Because the mortgage was now only £8k outstanding the cash flow was great - except that the tenants first cheque bounced and he was often 2 months in arrears.I self managed it and would never do that again. 

After a few months I got a better job about 70 miles away. At that point I refinanced the flat to get a deposit on a house in the new area, taking out £27k (more than the purchase price). The rent was £260pm and the mortgage about £140pcm so even after taxes, insurance etc it was pretty healthy ROI. Then interest rates went up and the mortgage went up to nearly £190pm (long term fixed rates are rare in the UK). The tenant moved out leaving the flat in a mess and me a month short of rent. Market had rebounded but looked like slowing down, and the area doesn't attract the best tenants so I did a lot of cleaning, some redecorating, and sold it for £60k in 2008.

It worked out pretty well for me in the end, but I would strongly recommend using a property manager and buying a property that is in a good enough area to attract good tenants. I now rent out another house through a property manager and the yield is much lower (though it is still cash flow positive) but the complete lack of hassle is totally worth it.

Neustache

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Re: Tell us about your first rental property!
« Reply #12 on: February 08, 2015, 05:14:05 AM »
I found a renter for the house we lived in, and then we moved to another house.  Kind of backwards, but that's what worked for us and was an easy way to get into it.

I liked this route because we knew the house.  We originally bought it in 2003 for 96,500, then moved in 2013 so had 10 years in that house.  It makes it hard to say what our purchase price is since lived in it for so long, but we owed about 70K on it when we moved out.  Our area was hit hard with foreclosures, so I doubt the house is worth more than 90K at this point.  We currently owe $64K on it. 

Rents were extremely low for the first year, but I have decent tenants who take great care of the house (some slow pays, though, and one bounced check!) and who have both gotten real careers since moving into the rental.  I bumped the rent up $50 a month when we re-signed the contract, which sounds nuts, but their starting rent was $675 and now it's $725.  Still a great deal for a 4 bed/2 bath, but much closer to market value (which is probably around $800-900 a month).  The next increase is in May and they know it will go up to $760.  I'll keep bumping it up until we hit around $800 and then slowly make increases from there (like $15 a month instead of $35-50).  I expect they'll stay for 3 more years and then will move right before their daughter starts school.  If they can.  Their credit sucks and they were supposed to work on it so they could buy this house from us, but I don't see that happening. 

I'm not cash-flow positive.  I would have been, had I not refi'd a few years back for a better interest rate and to a 15 year mortgage.  We have 10 years left on the mortgage, and we are 35. Every year the rent is paying about 5K in principal on the property.  Should we keep this property that long, we will end up with a free and clear property that gives us about 5K a year in profit.   I'm okay with that, and the $150 a month I'm putting into it is fine to me since I had to do less than a couple hundred of dollars worth of work to rent it out.  We moved out in August, they moved in the following month.   I could technically refi to a 30 year and be cash flow positive.  We want to pay this off in the next 3-4 years, so I'm not too worried about refinancing it.  If someone wants to loan us out money at 4.25 over a 30 year without closing costs, well, I'll be game, but I don't want to pay 2K for a refinance just to cash flow on paper, especially since we plan to have it paid off completely in a few years.

My plan is to replace every major system over the next few years.  This will either make it nicer to sell, or nicer to rent out knowing that the major systems are taken care of - I won't replace until necessary, rather, I'm just saving and expecting that the HVAC/Water Heater, etc will need to be replaced. 


Is this a good investment?  Nope. LOL.  Most people would tell me to sell!  However, I paid very little for college, so I'm chalking all of this up to "Rental School".  I've learned SO MUCH and look forward to investing in 3 more rentals in the next 7 years.   But with those, I'll follow the rules! The '1% rule',the 'you make your money on the purchase' rule, the 'tenant needs to make 3.5X the rent rule' and the 'credit scores above 620 rule'.  I've uh...learned a whole bunch in this process!

It'd be great if our first real estate investment was perfect.  It wasn't.  But it's been a great experience and I think I'll use what I've learned to make a great investment next time.  I used to get really hung up on doing things perfectly, and this whole thing has helped me realize that it's okay to fail a bit. 








monarda

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Re: Tell us about your first rental property!
« Reply #13 on: February 08, 2015, 10:27:53 AM »
Transaction details (price / financing / closing costs / repairs / rent)?
We bought two buildings at pretty much the same time, in 2001
(1) $156K, conventional 20% down, 30 year loan, 6.5%, have since refinanced to a 15 year 4% loan.
Significant amount of repairs and upgrades over the years.  Original rent ~$600 per 2BR unit,
rent now $1100 downstairs (still 2BR), $1500 upstairs (now a 3BR upstairs counting 1BR in the fixed up attic)
(2) $171K, conventional 20% down, 30 year loan, refinanced to 5% in 2009
Not as many repairs yet, rent is now for the two units $1900 ($1100 + $800).  Don't remember what we charged back in 2001.

Type of property / Yr of purchase / geographic market?
(1) 2-flat. bought in 2001, Madison WI, hip neighborhood.
(2) duplex, bought in 2001, Madison WI, good neighborhood, but not as nice as house (1)

Deliberate purchase of a rental property, or "accidental landlord"?
Deliberate

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?
Yes. I calculated the amount on some other thread, will find that post ...
here it is   
This is total cash flow, averaged for all 5 units, 4 of which described above. (We bought the 5th one later)

Self managed or get a property manager?
self

Do you still own the property?
Yes

Overall, how'd you do?
still doing well.  Keeping these properties is a big chunk of our retirement plan.

Are you still involved in real estate?
yes, still own both of these 2-unit buildings, and a SFH, so 5 units total.

Advice?
1% rule is a good place to start. Location is really important. Buying a rental in a good school district is one good strategy. Make it a nice place, where you'd like to live yourself. Then it will be easy to rent.
« Last Edit: February 10, 2015, 03:56:51 PM by monarda »

jluoma

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Re: Tell us about your first rental property!
« Reply #14 on: February 08, 2015, 06:50:44 PM »
Transaction details (price / financing / closing costs / repairs / rent)?
Bought a townhouse in Leesburg, VA using a VA Loan circa 2011.  Total price was $265K, it was a foreclosure and the previous owner did not maintain it well (and took all the appliances).   After about 10K in renovation costs, we lived there for about 2 years before buying a second property (under a VA Loan as well) and turned this into a rental.  My total costs PITI/HOA is around $1650/month and we rent the place out for between $1750-1950 (friend versus stranger price).

Type of property / Yr of purchase / geographic market?
Townhouse / 2011 / Leesburg, VA

Deliberate purchase of a rental property, or "accidental landlord"?
Didn't intend to buy two homes in two years but learned through a friend it was possible to own two homes both under the VA Loan program and rent one out.  It's actually a little-known fact but you can do it - essentially I bought two townhouses with no money down and no PMI.  So more of an "opportunistic landlord" I guess

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?
So far so good, had to replace the HVAC last summer which was an unforeseen cost but basically we average of $200/month in repair costs.   Vacancy has not been an issue yet but we're losing some really awesome tenants in May so we'll see. 

Self managed or get a property manager?
Self managed, we live just 6 miles away.  We did set it up under it's own LLC though for tax reasons.   We have also used a local real estate service to screen and find a tenant.  Typical cost for a real estate agent to list your house, run applications, and show the house on your behalf is one month's rent. 

Do you still own the property?
Yes

Overall, how'd you do?
So far it's worked out well, between the $100/month of income after costs as well as the principal down payments - it comes out to roughly $500/month of net value increase not including the appreciation of the house itself. 

Are you still involved in real estate?
Yes, actually thinking about purchasing another home in the next 3-4 years and renting out the townhome we're in now to have a second rental.  We'll see, my wife is getting a little tired of moving!

Any advice you want to pass on to newbies?
I'd rather charge less if it means I get good tenants.  My TH rents for about $200 less than comparable units in the area but I can then be pretty choosy on who to extend a lease too.   So far my tenants have probably INVESTED more money in aesthetics and other improvements than I have over the years.  I've never had a late payment and in turn- problems that are reported get fixed by me (or a professional if it's complicated) within 1-2 days of being told about it.  Remember that they are the customer!

Overseas Stache

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Re: Tell us about your first rental property!
« Reply #15 on: February 09, 2015, 07:12:36 AM »

My first rental was actually my first house I bought then rented it out when we moved, we have great tenants and it has worked at good. I would rather tell you about the first property that I purchased where it was bought as an investment property.



Transaction details (price / financing / closing costs / repairs / rent)?- bought for $126500. $800 in closing costs. Used 100K 5 yr interest only loan at 4% from my Grandmother. No repairs, got 1 year warranty from the person who rehabbed it. Intial GMI 1800 currently 2000

Type of property / Yr of purchase / geographic market? - Quadplex purchased in July 2014 in Chattanooga TN.

Deliberate purchase of a rental property, or "accidental landlord"? - Deliberate

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)? Well it has only been 7 months or so but it has been Cashflowing great.

Self managed or get a property manager? My father/co-owner manages it and I pay him for that.

Do you still own the property? yes

Overall, how'd you do? It is going great, we just bought another Duplex GMI 1560 for 117K

Are you still involved in real estate? Yep i'm addicted

Any advice you want to pass on to newbies?- Use a spreadsheet to evaluate each property based on the numbers. have a row for all expenses. ie vacancies, repairs, taxes, insurance, utilities (if applicable). and compare it to the Gross Monthly Income (GMI). It is also helpful if the sheet has purchase price, down payment amounts, closing costs, and then it gives you a mortgage payment. And then uses all this information to calculate your CAP rate (essentially your Return on Investment if you paid it all in cash) and your Cash on Cash Return (your ROI on your cash invested if you used a mortgage). Using a spreadsheet like this for every property you are interested in lets you know what purchase price will allow you to get the returns you want.

Blindsquirrel

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Re: Tell us about your first rental property!
« Reply #16 on: February 09, 2015, 05:42:55 PM »

Transaction details (price / financing / closing costs / repairs / rent)? Bought a house to live in for 38K in

Type of property / Yr of purchase / geographic market? SFR/1995/midwest edge of ghetto

Deliberate purchase of a rental property, or "accidental landlord"? accidental, moved 105 miles away for new job.  My neighbor asked if he could rent my house when I told him I was moving. PITI was about $345 a month, rented for $650 a month. Held it 10 years until he moved out and sold it for 60k to tenant.

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?
Yes, no vacancy, no real repairs.
Self managed or get a property manager? Self managed

Do you still own the property? Nope

Overall, how'd you do? Pretty good

Are you still involved in real estate? Yes, we run 17 SFRs now and have flipped 6 houses also.

Any advice you want to pass on to newbies? Never ever pay retail for a house. Never ever! Always buy foreclosures/short sale/distressed properties. In the midwest if you can't beat 2% a month in rent of total investment, find a better deal.  Really think about it before you become a landlord, it is not for everyone. Also, pay em off and your yield will be lower but your stress level will be lower also.
Even a blind squirrel finds a nut once in awhile.

MNBen

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Re: Tell us about your first rental property!
« Reply #17 on: February 10, 2015, 12:02:16 PM »
Transaction details (price / financing / closing costs / repairs / rent)?
I purchased a foreclosed property (condo) at auction.  I was made aware as it was the next door neighbor of a friend of mine.  Only 24 total homes in the association, and helping out my friend with the association, I was very familiar with their finances.   Buying a property at an auction is unlike any process I've ever been part of.  I purchased for just under $100,000 with the goal of my buddy and I fixing it up to resell it, as the highest resale at the time was about $140,000K and my buddy was currently unemployed and the property was just two miles from work, so I knew we could get it done quickly.

My mortgage, thanks to crazy offers at the time (as the market hadn't dropped yet) was a 10-year interest-only load (amortized for 30 years) that adjusts after 5 years, and every 6 months after.  So for the first 10-years the mortgage rates were very easy to handle, but after 5 years, my mortgage dropped to under $175/month! 

Type of property / Yr of purchase / geographic market?
Condo purchased via Auction (2007) in a suburb of Minneapolis, MN.

Deliberate purchase of a rental property, or "accidental landlord"?
I planned to purchase to fix up and sell, however the market fell too quickly and instead I rented it.  So "accidental landlord", kind of.  I was fully prepared to rent if I couldn't sell.

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?
I currently clear $475/month on a $975/month rent cost.   Rent is only so low because I've had the same renter (great renter) for the past 5 years. 

Self managed or get a property manager?
Self-managed.

Do you still own the property?
Yes.  In FIRE, I may end up selling my current home and moving into this first rental.  I liked it so much, I bought another one in the same complex at $70,000 and didn't fix it up to sell, but to rent (laminate floors vs. carpeting, etc.).   I clear $475/month on that one as well, only because it's 30-year fixed mortgage.

Overall, how'd you do?
Overall, it was a good decision.  Had I sold originally I'd probably be more leery to rent.  But instead I now have three rental properties that will be support most of my expenses when I FIRE.

Are you still involved in real estate?
Yes.  After those two properties, I have since moved from a townhome to single-family (with fiance) and decided to rent my townhome instead of sell it.   So I now rent three homes, all self-managed.

Any advice you want to pass on to newbies?
If you are extremely handy, or are not scared to learn, your expenses can be greatly minimized.  In my three rental properties, since being rented I have replaced a garage door opener, fixed a stuck garbage disposal (twice) which was easy but others may have replaced, replaced a garbage disposal, fixed a garage door opener, replaced toilet tank parts, etc.

And after purchasing and getting them ready to rent, I've done plenty of painting, installed laminate in an entire condo, replaced ceiling fans, installed new counters and sink, etc.

If you can do that all yourself, you will save a lot of costs.  Don't get me wrong, some stuff is out of my comfort level, or made sense to have done for me (or I was unable to get it done and it was urgent - such as furnace stopped working). 

ShoulderThingThatGoesUp

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Re: Tell us about your first rental property!
« Reply #18 on: February 10, 2015, 12:16:52 PM »
For those who bought at foreclosure auction - How did you ensure there weren't other liens not cleared by auction? Anybody had this bite them in the butt?

MNBen

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Re: Tell us about your first rental property!
« Reply #19 on: February 10, 2015, 03:38:02 PM »
For those who bought at foreclosure auction - How did you ensure there weren't other liens not cleared by auction? Anybody had this bite them in the butt?

I bought through auction company.  It was a large 2-day event where they auctioned off numerous properties.  I believe, but cannot confirm, it's the company that now uses auction.com.

As for answering the question, I guess I didn't.  Maybe I was naive?  Maybe I assumed through the closing process any issues would be discovered?  Maybe I just got lucky?

thedayisbrave

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Re: Tell us about your first rental property!
« Reply #20 on: February 11, 2015, 04:32:27 PM »
I just bought a 2nd unit but it's in the transition phase now so I'll just post on my 1st unit.

Transaction details (price / financing / closing costs / repairs / rent)?
Purchase price: $103,000.  Seller included $2k allowance for new paint & carpet.  Got a $75k mortgage for 4.625%.  Don't remember closing costs but I think around $1k. $350/mo per room, so gross $1400 per month.  I've kept it at this rate since 2011 so I'll likely be raising that to $375 when new leases happen in the fall which will be $1500 gross.

Type of property / Yr of purchase / geographic market?
4 bed/4 bath condo.  Set up as university/dorm/suite style with shared kitchen, living, and alcove/sun room.  Bought in 2011.  Near NCSU in Raleigh (Geekette, we must have been neighbors!)

Deliberate purchase of a rental property, or "accidental landlord"?
Deliberate... I had been accepted to NCSU for grad school for two different programs, so I knew whichever one I did I'd end up in Raleigh.  So I lived in one room, and rented out the rest.

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?
Yes, though since I lived in one room it didn't show it's true numbers. 

Self managed or get a property manager?
I had a property manager the first year, since I was still a senior in college.  I thought it was going well until I walked in to show my unit to prospective tenants.  The previous tenants trashed in - there was writing all over the walls, cigarette butts everywhere, trashed piled in the closests (and left there for months since that tenant got evicted) etc.  From then on I decided I would self manage or not own property.  Since that decision, things have been going well.

Do you still own the property?
Yes.  My brother now lives there with his 3 friends.  He'll move out early this summer and it will finally turn into a full fledged rental unit.

Overall, how'd you do?
Barring that first year, quite well considering I had *no* idea what I was doing at the time.  I saw the property, saw the numbers, didn't know anything about real estate or investing but my "gut feeling" was that the cash flow was decent so I jumped.  My initial reaction was right... though it's not one of those 2% cash flow deals you find the Midwest, it's tough to find much better in the area unless you want to venture further out of town.

Are you still involved in real estate?
Yes! Bought a 2nd unit just down the road and repeating the process.  I'm only 24 so college living is what I'm used to, though family thinks I should "move up" now that I'm a working professional.  I will move up in a few years.  I couldn't pass up the cash flow potential.  This new place I bought for $93k, renting two rooms out while living in the 3rd will gross $850/mo. 

I'm also a real estate agent.  So I guess you could say I'm involved ;)

Any advice you want to pass on to newbies?
Don't get analysis paralysis.  I know a lot of people who read and read about real estate investing but never pull the trigger.  I was kind of the opposite... I pulled the trigger, figuring I'd learn as I went... and learn I did.  It worked for me, but I know that's not most people's learning style.  At some point you just have to jump and learn on the way down.  Experience is the best teacher... just make sure you have enough set aside in case you hit any bumps in the road.
“It is good to have an end to journey toward; but it is the journey that matters, in the end.” -Ernest Hemingway

stickynotes

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Re: Tell us about your first rental property!
« Reply #21 on: February 12, 2015, 11:01:34 AM »
I wanted to jump in here because I think a lot of people become accidental landlords and then get hooked. This is exactly what happened to me about years ago and now I have 4 units and the cash flow is about 50% of my take-home salary. My first rental was my starter apartment in Washington, DC. It makes me crazy when I think about all the mistakes I made, but luck was on my side during the learning curve.

Transaction details (price / financing / closing costs / repairs / rent)?
Bought for $414K in 2007, refinanced into a 30-year fix 3.75% (if you're thinking of keeping a rental property that you used to live in, do not make the same mistake I did and refi it after you move. If you refi as a primary residence you'll get much better rates and you won't have to bring 30%. Mortgage is now $300K, recently appraised for $460K (which I think is insane). This is a condo so all maintenance outside the apt is covered (more on that later), I put $6k in to touch up the kitchen (new appliances, new counter tops) and spend about $200/yr on seasonal maintenance for the AC. Other than business license expenses ($500/every 2 years), it hasn't cost me a penny. total mortgage + property taxes + insurance is $1500. Rent is $2550/month (insane. washington dc rents are crazy).

Type of property / Yr of purchase / geographic market?
1-bedroom condo, boutique 8-unit building in cool / very walkable part of town; 4-floor walkup but with parking which is key in that area. Bought in 2007, refi'd in 2015; appeals to young professional who want to live in the center of bars + restaurants.

Deliberate purchase of a rental property, or "accidental landlord"?
Accidental and lucky.

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?
Cash flow is approximately $750/month (after $300/month in condo fees) - I keep a 5K reserve at all times and scrap off the rest to savings. Remember also that rental property is a combination of rent + tax shields + mortgage paydown. On paper this property makes almost nothing. And that's the way I like it. Keep your taxable income to as close to zero as possible.

Self managed or get a property manager?
Manage it yourself. You'll learn a lot more. And always always, always pick your own tenants.

Do you still own the property?
Yep. It will be my first and last condo unless I buy something else in that building and assume beneficent control of the board.

Overall, how'd you do?
Well enough to buy three more buildings :)

Are you still involved in real estate?
Yes. It's pretty addictive.

Any advice you want to pass on to newbies?
1) be ruthless about picking tenants. they will either make your life glorious or hellish. When you find good tenants, treat them like kings. It will pay you back.
2) don't follow my first example and buy a condo. Condo fees will make you insane. My strategy is small multi-unit buildings in the city. I like the tenant turnover (no one stays for decades), I like the low maintenance of smaller buildings (no lawns, no pools, no driveways etc), I like the high rents and I like being able to control the entire building. I don't understand the SFH model, but then again, I'm not that handy so it just means more maintenance for me.
3) Never make an emotional decision about real estate. Make decisions based on what the numbers say. If you get outbid, wait for the next ones. Keep your powder dry, as my dad used to say, for firesales. They happen more than you'd think.
4) Never keep a property that only breaks even. You'll never make a cent that way. Something will always need to be fixed and those little things will add up and drain your wallet. Make sure you have cash buffer.
5) Don't be afraid to buy something ugly and fix it up. Sweat equity - particularly cosmetic stuff - pays dividends and it probably means you'll get a better deal when you buy. most people looking at property want to have an emotional reaction to it. No one falls in love with a 1980s kitchen. But that's easy to update and renters aren't as picky.
6) read everything. particularly about the US tax code (which is wildly favorable for landlords) but also about rental rules and regulations in your city. find out if you need to be licensed to be a landlord, make sure you know things like your local fire code requirements for rentals cold. If you ever end up in court, playing by the rules will make your life a lot easier. Also - just FYI, if you're planning to finance something, you want to be declaring rental income on your taxes, this will allow the mortgage debt you're carrying to offset (I think it's up to 75%)
7) and finally, keep scrupulous, OCD-type records. Every drive you make to check on the property, every flower pot and nail you buy. You'll thank me when you do your taxes. And you'll also thank yourself when your tenant claims they paid their October rent and you can't find it in your account.

Good luck! It's not for everyone - but if you're the right type of person, you'll really love it.


Jesstache

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Re: Tell us about your first rental property!
« Reply #22 on: February 12, 2015, 12:30:44 PM »
My husband (before we had ever met) bought a 700 sq foot 1 bed/1bath house very close to downtown in Bend, Oregon (resort town) in 2003 for (I think) $160k, with 20% down and a rate of 5.65% for 30 years.  Mortgage of around $850/month.  His company went bankrupt not long (1 year, maybe) after and he moved to TX.  He "rented" it to his friend for a YEAR for FREE in exchange for his friend doing work on the house to fix it up.  He did jack squat so he started charging him $500/month.

This went on and then my husband and I met, dated, got married, still in TX.  Somewhere in there, the original friend/tenant bought a house of his own and another friend swooped in to rent it and my husband upped the rent to $700/month at my urging.  This friend rented for approximately 3 years and it worked out okay since he took care of all the maintenance and upkeep pretty well for us while we lived several states away.  Our incomes were insanely high so it was a HUGE tax write-off for us.  We might have even come out profitable in this deal.

We moved back in 2012 (as soon as the opportunity presented itself) and coincidentally, the friend decided it was time for him to buy his own house about 2 months after us arriving back.  We took 2 months to completely update the house (new roof, bathroom, carpeting, refinish hardwoods and exterior paint) and rented it for $850/month and refinanced to 15 year rate at 2.85% (no fees either!) for a new mortgage of $750/month.  We have since upped it an additional $25/month and our current tenants are excellent (reason I only upped it $25/month).  I manage the rental house and my husband does all the repairs within his skillset (about 95%). 

This past year we netted (according to my 2014 tax return) around $2000 profit.  More importantly, the current value of the rental house is around $240k.  It is in a prime location so we are keeping it for its appreciation and (now, cash flow).  When I posted it for $850/month i got about 20 responses in 10 minutes.  I obviously set the rent too low, I imagine I could get $950-$1000/month and still be able to be picky on renters.  Current rental vacancies in the city are less than 0.5% and rents have skyrocketed the last 2-3 years as well as home prices.  There are a lot of outside investors and vacation rental speculation to compete with for real estate.  We plan to keep this place for the long haul.  We've discussed having our kids rent it from us while in college (15-18 years off), living in it in retirement ourselves, or just living off the rental income in retirement.  I also want to look into listing it as a vacation rental once my kids are in elementary school which could seriously up its cash flow.  Right now I don't have the time to devote to that as I would want to manage it myself and I have a 3 and 1.5 year old to take care of.

tensile

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Re: Tell us about your first rental property!
« Reply #23 on: February 13, 2015, 05:32:45 PM »
Transaction details (price / financing / closing costs / repairs / rent)?

In GBP - 22,800 / It was so cheap I could pay on a 5-year-personal loan (property was in such a state I couldn't get a mortgage - was a huge panic for a while) / occasionally needed repairs / income was about 300/month when occupied

Type of property / Yr of purchase / geographic market?

A 3-bedroom terraced house in a crappy area / about 2000 / notorious high-crime area near the city centre (huge effort was made to police the area, modernise properties etc - lucky coincidence)

Deliberate purchase of a rental property, or "accidental landlord"?

Deliberate - it seemed like property was too good to be true - I couldn't find the catch. Tenants pay the mortgage!

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?

Monthly payments on the loan were over 400, so the rent didn't cover it, and it wasn't tenanted all the time (sometimes I lived there, which later proved useful for tax reasons). But everything after the first 5 years was pure profit. Hard to replicate that these days!

Self managed or get a property manager?

Roped my mum into doing it while I traveled. Unpaid! (She still does it but now I pay her a proper fee)

Do you still own the property?

Sold about 8 seconds before the 2007/8 crash. High five! (Pure luck by the way. Would love to claim it was some genius move.)

Overall, how'd you do?

Amazing. We spent about 20,000 in 2007 totally renovating it - by the end it was probably the best house in the area and sold for a premium (135,000). If I hadn't bought that house I'd be starting from zero now (in my financial independence quest).

Are you still involved in real estate?

Yes. Used the sale proceeds to buy two small, cheap, high yield flats. Am planning to mortgage them and buy another two.

Any advice you want to pass on to newbies?

- The property described above and the two I own are ones I would never, ever, have touched with a bargepole. They are in areas I would much prefer never to enter. My mother recommended the first one and had a vision of what it could potentially look like. When we did it up and sold it, her vision was fulfilled. She also saw the potential in the new ones - and was right.

So find someone you trust with an eye for interior design and who can see beyond the reputation of an area.

- Try to hang on to good tenants - I recently renovated a bathroom (using frugal methods) that I didn't need to because the tenant had some medical problem and needs a bathtub. It cost less than a month's rent, was a fractional improvement to the property, will help keep the tenant, and makes me feel like a bit of a better person! I'm sure it's cheaper to make the occasional improvement than have downtime and pay to find new guys.

- I'd suggest starting small and cheap. In my home city you can buy a cheap little flat for 50,000 with a 10% yield.





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GuitarBrian

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Re: Tell us about your first rental property!
« Reply #24 on: February 13, 2015, 10:23:36 PM »
Transaction details (price / financing / closing costs / repairs / rent)?

Foreclosure auction on a house friends of mine owned. / $79,100 / 50k cash, 30k family finance at above market 5% (I was 22, no credit or income) / Closing cost $0 / trivial repairs, less than $1,000 / rented 3 days later for $850 (tenants were good, stayed for 3.5 years) now rented for $1050.

Type of property / Yr of purchase / geographic market?

3/2 with 2 car garage. Purchases in 2010. Phoenix (Mesa)

Deliberate purchase of a rental property, or "accidental landlord"?

Deliberate

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?

Yes (total of 18 days vacant since bought) Gross rent receipts of $43,626 against $9,000 in costs (including taxes/insurance/interest and replacing roof this year)

Self managed or get a property manager?

Self managed.

Do you still own the property?

Yep.

Overall, how'd you do?

Great so far, house doubled in value. Paid off loan in 2013.

Are you still involved in real estate?

Yes, have a second rental as well. Much different story, but a different circumstance.

Any advice you want to pass on to newbies?

Find good tenants. Find good tenants. Find good tenants... (not easy)

I find house repairs to be quite easy compared to cars and boats. But even if you hire stuff done, just be active in the process and stay on top of things. Have a firm agreement on when payment is made, my rule is after work is done and I have inspected. I have had luck on craigslist posting "gig" ads.

I now work 6 months a year and am saving to buy a 3rd rental.

I go into it with the idea that I can afford to rent for less than everyone else, because rents are based on jobs and that is a whole different topic.

jooniFLORisploo

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Re: Tell us about your first rental property!
« Reply #25 on: September 27, 2017, 12:43:14 PM »
Got a mortgage on a triplex with great bones and some mess, cleaned it up, did some light renos over time, lived in smallest unit.
Rental income more than covered all costs.
Some tenants were phenomenal; a few were rotten enough to prompt me to sell.
Sold for more.

Extremely worthwhile financially, but that was only because prices happened to go up.
If they hadn't, I would have been "paying" for my free place to live with lots of work, responsibility, and stress.
Landlording those few rotten tenants really took a toll on me.
I'm glad I got the appreciation, but wouldn't do it again unless desperate.

My advice:

1. Know the rental laws of the region you'd be landlording in.
Some areas' tenancy laws put the landlord at too high a risk.
Even if they don't, you need to know the laws governing your work.

2. Consider whether you or a different person should be the property manager.
It can be a real boon to have someone arm's length to deal with issues.
Are there people in the area available for this work, who are good at it?
If the income can't cover this OR there's no one excellent available to do the work, are you up for the calls and interpersonal stuff?

3. Only get a place in which the income immediately covers all costs and then some, even if a unit is vacant for three months.
Immediate net means you're not relying on appreciation.
Financial room for three months vacancy lets you choose tenants.
That "vacancy" room means if the rental market dips, you have room to reduce rents to match the market.

4. Introduce yourself to all neighbouring properties, give a card with your name and contact info, ask neighbours to contact you if they note anything of concern. My good neighbours saved my butt when I moved off-property.

SwordGuy

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Re: Tell us about your first rental property!
« Reply #26 on: September 27, 2017, 01:49:48 PM »
For those who bought at foreclosure auction - How did you ensure there weren't other liens not cleared by auction? Anybody had this bite them in the butt?

I bought through auction company.  It was a large 2-day event where they auctioned off numerous properties.  I believe, but cannot confirm, it's the company that now uses auction.com.

As for answering the question, I guess I didn't.  Maybe I was naive?  Maybe I assumed through the closing process any issues would be discovered?  Maybe I just got lucky?

I believe that is one of the purposes of buying title insurance.

Goldielocks

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Re: Tell us about your first rental property!
« Reply #27 on: September 27, 2017, 02:35:29 PM »
Two "first" homes -- different structure / rationale...  Definitely a "learn from mistakes" situation.

First Ever:  Apartment in high COL area

Transaction details (price / financing / closing costs / repairs / rent)?


Type of property / Yr of purchase / geographic market?
2 Bed 1 ba apartment, near the subway line, major shopping center, parks

Deliberate purchase of a rental property, or "accidental landlord"?
Accidental.  Market was depressed when we moved, so we placed it in our buildings rental pool.

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?
Self managed or get a property manager?

  Hmm,  not really.   The rental pool was the only option for owners.  If you wanted to rent, the bylaws said it MUST go into the rental pool, because then the owners HOA only had to deal with a single property manager if problems arose.


Do you still own the property?
  No.  Sold it when the market broke even to what we paid 7 years prior (we lived it in ourselves for 3 years first).

Overall, how'd you do?
Broke even, barely.
The problem with the rental pool, which had 48 units in it and a live-on premises caretaker, is that vacancy for any unit or maintenance costs were spread across all the units, every month.  You only received a share of the total.   What happened was because the management company also managed the books for the Condo HOA, they were very responsive to the HOA, and refused to rent out unless they found an ideal tenant, such as a senior that would live there for 10 years and not cause a fuss.  This meant vacancy across 48 units was over 6% (3 units at least, every month) although the city's vacancy rate was 1%.   Also, that they rarely increased rent on some of the seniors for many years (before we became involved), and only recently had rectified that, but local laws limited annual increased to current CPI, so many units were rented at $100/month below market, and no getting out because seniors stay for years and years.   The management company only pulled about 5% for their fee, because of the bulk discount, so that wasn't so bad, it was how they managed the rents and vacancies.   I think we lost money, maybe $1000 per year for 4 years.

When we sold, we recouped rental losses net of realtor fees, but did not recoup any of the costs for updating / renovating that were put in only 4 years prior (new kitchen, new blinds, new closet doors and organizers, new bath vanity / toilet, new tile).   We also did not recoup much of the $15k assessment that we had to pay for the plumbing stack retrofit.    In my mind these were equally related to our ownership position before the rental.. and the assessment was bad luck to happen in those years, if we waited 5 more years, we would have made a LOT on appreciation.  (Sold it in 2002).   Only sold because of kid #2 being born and wanting a detached home with the equity.

Are you still involved in real estate?
  See next story

Any advice you want to pass on to newbies?
Need to vet management rental pools for profitability.
Always increase your rents each year.
Use a lease if you need to , to get bad renters out at the end of the lease.
Allow for 1 month/year of vacancy...!  Holding out for a "perfect" renter does not pay. Instead lower your price by $50 to get many people to choose from and get it occupied faster.


SECOND FIRST:   Self-managed Duplex (half) in LCOL area

Transaction details (price / financing / closing costs / repairs / rent)?

Purchased for $135k.  Conventional Mortgage,  Rented for $950, about $50 above market.
Mortgage and property taxes and insurance cost $750 per month.  Cash Flow $150 per month  (Plus the principal payments on 25 year amortization).  $50 per month allowed for minor maintenance or 1 month vacancy every 2 years.

Deliberate purchase of a rental property, or "accidental landlord"?
Deliberate investment

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?
Yes!  It was in decent shape when we bought, although we had to repair all the toilet valves and many shut off taps / drippy faucets.  Major cleanup and maintenance (caulk / repair trim, wax the kitchen floor, etc).. elbow grease and $100 of supplies from home depot.   Minor costs for repairs during tenancy because DH did all the work.

Self managed or get a property manager?
Self managed, DH equated it to paying himself $50 per hour... see below.

Do you still own the property?
No. Sold it after 1 year and tenants moved out (in the middle of the night).  After cleaning it up for re-rental, we asked ourselves if we wanted to continue or sell.  We sold because appreciation of the market was up a lot in 1 year, and we could make our 5 year target after only 1 year, so we got out.

Overall, how'd you do?

We had problem tenants.   DH' averaged about 6 calls per month (in person visits to chase rent, or to resolve tenant help requests.).  One time the tenants decided to change out the faceplates on the electrical in the kitchen, and shocked themselves, ruined some electrical, and called to complain that the home was defective and it was our fault.  DH went over, reset the electric, changed what needed it, and explained that they were not authorized to do their own electrical work, that you need to turn all the power off, that kitchen plugs had two circuits top and bottom, and that shoving a screwdriver into the box after removing the cover, before turning it off is a BAD idea.   

We also had lots of calls for the running toilet, overflowing toilet, etc which always came at 6pm on a weeknight, and only 33% of these were not user-caused and all of them could have waited until the next day, but were not described that way on the phone.  You can't ignore a plumbing emergency call involving water.

The kicker was that after 3 months, they stopped having money to pay rent.  We had post-dated cheques and they bounced every month for the next 7 months, and we learned how to go to their bank, in person, to have the clerk check the account and pay us out immediately, or we would hold the cheque, and would show up every day for the next few days until it went through and we were paid before other creditors as soon as their pay hit the account.  (A hassle).

We also received city notices  ($100 if we did not resolve in 72 hrs) to remove debris from the yard (lane side).. they had an old car that was an eyesore just sitting there rotting..

Are you still involved in real estate?
  No.   After we sold, to afford a detached home, we had to pull all our equity.   If we could get close to 1% again in rents locally, I would definitely consider doing it again, for certain, because I have made the mistakes, so future will be even better.

Any advice you want to pass on to newbies?
Get a credit check and a criminal check if legally allowed. They were a nice family with a kid in school down the street. We checked references, prior landlords, I called both employers for an employment verification / reference, and it all looked great.   Both lost their jobs within 4-5 months. Turns out husband only held jobs for 3-6 months at a time, and wife was at 1-2 years only.   Upon their disappearing in the middle of the night, with 2-3 months of rent owning, we realized that they had major credit problems before, they  knew the tricks to get by with shut off utilities.. they had put 15watt bulbs in the lights (electric was cut off), gas unpaid in winter (illegal to cut off), and we received calls from paycheck cashing places.

Also, start the eviction for no pay immediately.  Renters have the ability to lift this with NO consequences if they pay up in 2 weeks, so no need to be "nice" and let it delay for 2 weeks.  The eviction process already allows for that.   I trusted the because "Mom died and we are flying to ontario for the funeral". but we are getting an inheritance.. "Our son got out of jail and stole the rent money".. " Taxes were higher than we thought for DH's new job because of the housing allowance when he is in camp"..

Do your own minor maintenance, and be the type to respond to 6pm calls. (or have the $s to pay property manager to do this). Don't be an absent landlord.  We had a lot better handle on things when they started to go wrong because of all the hands-on time we had throughout the prior months. 

Rent the place for market rent -- because we had higher rent, we had fewer quality applicants applying: we had an overly picky senior, complaining during the application about the dirty kitchen vinyl (That I had just stripped and waxed it myself two days earlier.  It was white, but discoloured by UV in one spot).  A group of three students in first year university with no credit history or ability to pay individually for the whole thing, and a teacher that did not get the application in until after the deadline.. and this nice family.

Other than the car in the back, they kept the place nice, and built a deck with basic materials we bought, that covered in hindsight the value of 1 month of the lost rent.   We had no address to forward the security deposit, and enough "damage" (the car in the rear, the electric, etc) to legally justify keeping it, so recovered a second month. 

Cwadda

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Re: Tell us about your first rental property!
« Reply #28 on: September 27, 2017, 02:47:19 PM »
Transaction details (price / financing / closing costs / repairs / rent)?
Purchase price: $347k
Down payment: 3.5%
30 year fixed at 4.125%
Closing costs: $12k (and $4k of it rolled into mortgage)
Total cash required for closing: $20k
Repairs: $8k, and $300 monthly budget
Rent: Currently $3600/month plus owner-occupied.  The rents will yield $4600/month once I move out.
Mortgage payment (includes T&I): $2700/month

Type of property / Yr of purchase / geographic market?
Owner occupied multi family (4 family), 2017, New England area

Deliberate purchase of a rental property, or "accidental landlord"?
Deliberate

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?
It cashflows $300/month now, and I live there for free.  Once I move out, it will cash flow approximately $1400/month.  Once PMI is removed, it'll cash flow $1650 a month

Self managed or get a property manager?
Self managed

Do you still own the property?
Yes, and will probably own it till I die. Or it gets hit by a tornado.

Overall, how'd you do?
Working great so far.  I like the fact that even if I have one unit empty all year, my mortgage is still completely covered.

Are you still involved in real estate?
Yes, will be buying another property next year.

Any advice you want to pass on to newbies?
If you're on the fence about an owner-occupied investment property, just do it.  You won't regret it later.
« Last Edit: September 27, 2017, 02:54:23 PM by Cwadda »

Northstar

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Re: Tell us about your first rental property!
« Reply #29 on: September 27, 2017, 03:03:45 PM »
Hi everyone! When I purchased my first rental I was super excited, It was all the things a good property was suppose to be, just covered in 30 years of hoarding and filth. I purchased the property after hearing about it from a friend of the family who owned it. They had fallen on hard times and needed to sale, I was curious in real estate investing, So I jumped in.....

Transaction details (price / financing / closing costs / repairs / rent)?
$20,350, PAID CASH, $800 CLOSING, $15,000 IN REPAIRS, MONTHLY RENT $850.00

They only wanted the house paid off ($20,350) so I paid it off and they moved out. Perfect story right? WRONG!   IT WAS DESTROYED! inside was awful, terrible, gross and any other word you want to add, I moved a tractor trailer load of trash and furniture out of it, the floor joist was rotten, subfloor rotten in the bathroom and more. I put on new siding, HVAC, lighting, bathrooms, flooring, roof, paint, basically everything aside from windows. I pretty much flipped the house.

Type of property / Yr of purchase / geographic market?

3 BED 2 BATH, 2015, SMALL RURAL TOWN OF AVERAGE TO BELOW AVERAGE EARNERS, MAJORITY OF PROPERTIES ARE RENTED INSTEAD OF OWNED.

Deliberate purchase of a rental property, or "accidental landlord"?

DELIBERATE PURCHASE

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?

YES, CASHFLOWS WELL EVEN IF I HELD A NOTE ON IT

Self managed or get a property manager?

SELF MANAGED

Do you still own the property?

YES

Overall, how'd you do?

OVERALL, IT WAS A HOME RUN. NOW IN THE BEGINNING IT WAS A RISK, AND ALOT OF WORK. BUT REALISTICALLY I REPAIRED OR REPLACED MOST OF THE MAJOR SYSTEMS FOR THE PROPERTY, SO LOOKING AT IT FROM THAT STANDPOINT IT SHOULD BE A RELATIVELY LONG TIME BEFORE IM HIT WITH A MAJOR COST LIKE HVAC OR A NEW ROOF, ALSO WHEN I WENT INTO THE PURCHASE I FELT THE HOUSE WOULD RENT FOR $650, AFTER THE RENOVATION I HAD A TON OF INTEREST IN THE PROPERTY SO IT ENDED UP RENTING FOR $850 AND HAS NOT BEEN VACANT.

Are you still involved in real estate?

YES I CURRENTLY OWN 8 UNITS ALL SELF MANAGED

Any advice you want to pass on to newbies?

MY BIGGEST ADVICE IS TO BE REALISTIC, IT ISNT EASY, BUT IT IS WORTH IT. BE REALISTIC ABOUT EVERYTHING TO DO WITH REALESTATE, THE NUMBERS DONT LIE, YOU WILL DEAL WITH GOOD PEOPLE AND BAD, UPS AND DOWNS. IF IT WAS EASY EVERYONE WOULD DO IT, BUT ONCE YOU GET INTO IT, YOU DEVELOP SYSTEMS THAT HELP YOU AND DO MAKE IT SEEM EASY AT TIMES. ALL IN ALL YOU HAVE TO WANT IT, IF YOU DONT TRULY WANT IT, YOULL FIND A REASON TO SALE OR NOT BECOME PROFICIENT IN THE ART OF PROPERTY RENTALS. IF I WERE TO GO BACK THE ONLY THING I WOULD CHANGE IS THAT I WOULD HAVE GOTTEN IN THE GAME EARLIER!

SwordGuy

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Re: Tell us about your first rental property!
« Reply #30 on: September 27, 2017, 07:20:30 PM »
Transaction details (price / financing / closing costs / repairs / rent)?
$38,400 cash purchase, about $6,600 in repair cost, rent is $765.  About 4 months of long weekends and an occasional evening to get it up to snuff.

Type of property / Yr of purchase / geographic market?
SFH, 3/1, 2013 or 2014, our local city.

Deliberate purchase of a rental property, or "accidental landlord"?
VERY deliberate.   IMO, most of the horror stories about landlording come from accidental landlords.  Most of the rest come from folks who didn't bother to learn how to run the numbers before they bought the property.

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?
Oh, yes.   About $4,800 a year.

Self managed or get a property manager?
Property manager.  We still have day jobs.

Do you still own the property?
Yes.   No plans to sell for the foreseeable future.   Will need to turn it into a 3/2 and connect the laundry room to the house better to give the house more "legs" for the future.

Overall, how'd you do?
We're happy!  $4,800 a year for about 14 weekends' worth of work several years ago, and a few hours per year afterwards, is a deal.

Are you still involved in real estate?
Absolutely!

Any advice you want to pass on to newbies?
1.  Learn to calculate the numbers on profitability.
2.  Learn to calculate the numbers on profitability.
3.  Learn to calculate the numbers on profitability.
4.  Learn to calculate the numbers on profitability.
5.  Learn to calculate the numbers on profitability.
6.  Learn to calculate the numbers on profitability.
7.  Learn to calculate the numbers on profitability.
8.  Learn to calculate the numbers on profitability.
9.  Learn to do stuff yourself to cut costs.
10.Learn how to buy properties at wholesale prices.
11.Learn your market.
12.Learn the law and follow it.
13.Be ethical and treat people right, 100% of the time.
14.Be ethical and treat people right, 100% of the time.
15.Every 5th or 6th property, do something charitable with it. 

jooniFLORisploo

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Re: Tell us about your first rental property!
« Reply #31 on: September 27, 2017, 07:26:21 PM »
^ I did all that, but it didn't prevent nightmare tenants.

jooniFLORisploo

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Re: Tell us about your first rental property!
« Reply #32 on: September 27, 2017, 07:41:34 PM »
I guess what I would add, then, is:

Don't imagine you can necessarily prevent a problem tenant, one that can bring high costs to you, and high stress to you and to your other tenants. Not every problem tenant has a criminal record, and plenty of them have great credit and good "references." Be humble enough to know this is not entirely preventable, be sure you're up for it, and have a good plan in place for when it happens.

Cwadda

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Re: Tell us about your first rental property!
« Reply #33 on: September 28, 2017, 02:17:57 PM »
^ I did all that, but it didn't prevent nightmare tenants.

Even with a property manager?

Goldielocks

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Re: Tell us about your first rental property!
« Reply #34 on: September 28, 2017, 02:19:28 PM »
^ I did all that, but it didn't prevent nightmare tenants.

Even with a property manager?

Property managers can have nightmare tenants, too, they just shelter the landlords from the nightmare, other than the financials.

jooniFLORisploo

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Re: Tell us about your first rental property!
« Reply #35 on: September 28, 2017, 06:20:07 PM »
Even with a property manager?

Yep. I brought a property manager (team) in when I moved out of the city. So, while I lived in the building, while I lived a few blocks away, and while I lived further away and had a property manager, same crap. Again, this was a minority of the tenants -the majority were dreamy. But one crap tenant can do a looooooooooooooot of damage, and take a long time to remove. And if they bring their friends in? Oy.

An acquaintance -a long time landlord- had a tenant do $30k in damage to his place around the same time.

Those kinds of things changed my math and plan.

KBecks

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Re: Tell us about your first rental property!
« Reply #36 on: September 29, 2017, 06:02:04 AM »
This is a great topic.  I am in the camp of -- intrigued by rental real estate but chicken to try it.
Go to Bigger Pockets if you have not already been there and suss out the experienced landlords.

Cwadda

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Re: Tell us about your first rental property!
« Reply #37 on: September 29, 2017, 07:06:59 AM »
Even with a property manager?

Yep. I brought a property manager (team) in when I moved out of the city. So, while I lived in the building, while I lived a few blocks away, and while I lived further away and had a property manager, same crap. Again, this was a minority of the tenants -the majority were dreamy. But one crap tenant can do a looooooooooooooot of damage, and take a long time to remove. And if they bring their friends in? Oy.

An acquaintance -a long time landlord- had a tenant do $30k in damage to his place around the same time.

Those kinds of things changed my math and plan.

And that PM put that problem tenant in place?  That's outrageous. 

I guess my only advice would be to interview 3-5 different PM companies and vet them out.

jooniFLORisploo

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Re: Tell us about your first rental property!
« Reply #38 on: September 29, 2017, 09:12:32 AM »
And that PM put that problem tenant in place?  That's outrageous. 

I guess my only advice would be to interview 3-5 different PM companies and vet them out.

Well, I've been living in rental buildings for 28 years. It happens a lot, under very careful PMs. They're mortified when a quiet person with clean checks and references turns out to be a nightmare, and work hard to rectify the situation as quickly as possible. I don't think it's the PM's fault. Once they've done due diligence, most tenants work out...and a few don't. I wouldn't blame a PM for some tenants being strategic jerks.

Goldielocks

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Re: Tell us about your first rental property!
« Reply #39 on: September 29, 2017, 02:32:09 PM »
And that PM put that problem tenant in place?  That's outrageous. 

I guess my only advice would be to interview 3-5 different PM companies and vet them out.

Well, I've been living in rental buildings for 28 years. It happens a lot, under very careful PMs. They're mortified when a quiet person with clean checks and references turns out to be a nightmare, and work hard to rectify the situation as quickly as possible. I don't think it's the PM's fault. Once they've done due diligence, most tenants work out...and a few don't. I wouldn't blame a PM for some tenants being strategic jerks.

The cases I know of, are where a grown person had been living with family, and is on their own for 1-2 years, and changing landlords.  Maybe they just managed to pay their past rent sort of on time, so the reference is fine, and their credit checks out, but then you get them and it is all down hill.

Or a divorce while signed on a lease, subletting to the "nice" friend, or a job loss followed by depression and illness (mental illness?), picking up a gambling habit -- these things happen to people for the first time no matter what age they are, so great checks and in person ability to come across well can still end up being a nightmare.  Oh, and people that get a dog and don't know how to care for a dog, and cause a lot of damage and noise.

makinbutter

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Re: Tell us about your first rental property!
« Reply #40 on: October 02, 2017, 03:59:51 AM »
Hi all

So tell me about your first property!  Here's the stuff I'm curious about (if you're willing to share - I understand if you want to keep certain parts private).

Transaction details (price / financing / closing costs / repairs / rent)?

NUMBERS A LITLE FUZZY, this is all off the top of my head

Price 105k from a wholesaler, did about 10-12k in renovations/repairs
All-in around $45k out of pocket after accounting for down payment, closing costs, prepaid escrow, renovations
Gross rent 1.5k
All-in PITI $680

So I should profit $820 a month, right?? Schwingggg!

Wrong-o, with ongoing maintenance, PM costs, putting aside some for capital expenditures and vacancies, I think I'll probably clear like 300-400.

Type of property / Yr of purchase / geographic market?

Duplex in solidly  blue collar area, I'd call this one a maybe C+ Or B- area. My Tenants are pretty chill blue collar employees. Bought in 2015.

Deliberate purchase of a rental property, or "accidental landlord"?

Deliberate - I bought this purely over the internet and still 3 years later haven't seen the place in person. Google street view ftw

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?

Haha yep it better. I should average something like $300-400 per month long term, meaning cash-on-cash is around 9-10% (back of the envelope calculations)

Self managed or get a property manager?

PM for sure. A PM makes or breaks the deal IMHO, esp when you're a long distance landlord and you're still not 100% sure your house exists. I keep getting checks in the mail, though...

Do you still own the property?

Yep, this little blue collar rental is chugging along. Tenants still in place so I'm keeping the rent as-is and saving $$$ by having no vacancy. At some point (likely between tenants) ill up the rents, whocug will increase the value of the property to another investor, then I'll refinance out a bunch of dough and funnel it back into da bidnazz

Overall, how'd you do?

I call this one a base hit, maybe a double if there are only moderate CAPEX issues. The area won't appreciate for shit but this is throwing off  dough monthly is getting back into the business.

Are you still involved in real estate?

Yep, picked up another building in the same town because the PM is the devil I know, so to speak.

Any advice you want to pass on to newbies?


I'm with swordguy... learn to calculate profitability or you're absolutely fucked. That does NOT mean rent minus mortgage, which is what all my non pro friends seem to think.

If we are being honest, a straight 9% CoC return is pretty ho-hum, and the only thing that makes this a winner for me is the leverage and the fact that the tenants are paying this baby off. Assuming inflation sized appreciation and some moderate principle paydown in the next few years, the IRR should far outpace stocks (at least forn me in an index fund). I plan to move most of my non 401k dough into RE investing for this reason. Maybe I'll get better at it, too, and pick up some that are better than base hits (a few doubles and a triple here or there), but for now early in my RE career, a few base hits ought to win the game.

For other newbies, can't recommend BiggerPockets enough. Learn how to calculate profits and make the plunge. I did it with a 'relatively' small number (even if this rental goes to shit and I lose all 100k, meh, won't ruin me for life), so it's certainly doable. Also, remote investing fucking rocks. My market (northern VA) sucks donkey balls for rent to purchase price ratio. I was actually inspired by @Arebelspy to try this method and I am pretty pleased with the results.

Current numbers (fuzzy as shit, back of envelope) for my two buildings (duplex and quad)
Gross rents : $4100
PITI : -1800
PM fee : -400
Vacancy : -400
Capex/ maintenance : -600
Utilities: -100

Notional profit : $800/month, or 9k per year on about 90-100k in. This isn't a particular great return, but add into that 3-4K principal paydown yearly and even a conservative 1% appreciation (another 3k+) and the numbers start to look a little sexier. Oh and depreciation tax bennies



YoungGranny

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Re: Tell us about your first rental property!
« Reply #41 on: October 04, 2017, 10:36:21 AM »
Transaction details (price / financing / closing costs / repairs / rent)?

$33,000 - all cash - closing costs were right around $1k - put in $1k of repairs - rents for $750

Type of property / Yr of purchase / geographic market?

Condo/2016/B

Deliberate purchase of a rental property, or "accidental landlord"?

Deliberate purchase

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?

Yes - better than expected actually - pros of being a worrier and triple checking my numbers.

Self managed or get a property manager?


Self managed

Do you still own the property?

Yes!

Overall, how'd you do?


Invested $34k, owned it for a year and half and so far averaged $6k a year after maintenance expenses for an 17.6% return. We're super happy with this unit.

Are you still involved in real estate?

Yes we just bought our 2nd property.

Any advice you want to pass on to newbies?


I'm definitely still new to the game! One thing I've learned is to continue learning and asking pros for their advice.

The best advice I have so far is to run your own numbers and decide what your own returns need to look like. I've had some people tell me that if it covers the mortgage I would be building equity so I should buy. RUN away from those deals (at least in my city) - you gotta cover your expenses and get some money in the bank otherwise an index fun is way easier and likely a better place to park your money.
« Last Edit: October 04, 2017, 10:44:57 AM by YoungGranny »

jooniFLORisploo

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Re: Tell us about your first rental property!
« Reply #42 on: October 04, 2017, 10:43:41 AM »
The cases I know of, are where a grown person had been living with family, and is on their own for 1-2 years, and changing landlords.  Maybe they just managed to pay their past rent sort of on time, so the reference is fine, and their credit checks out, but then you get them and it is all down hill.

Or a divorce while signed on a lease, subletting to the "nice" friend, or a job loss followed by depression and illness (mental illness?), picking up a gambling habit -- these things happen to people for the first time no matter what age they are, so great checks and in person ability to come across well can still end up being a nightmare.  Oh, and people that get a dog and don't know how to care for a dog, and cause a lot of damage and noise.

These are great points, Goldielocks.

Sometimes a person is responsible during one long period in their life, but then starts losing their capacity for that.

And plenty of people who are conscientious, clean-living, etc, run into new circumstances that they're unable to cope perfectly with: sudden job loss; sudden incapacitating illness in themselves or a dependent; a stressful divorce or custody issue; new addiction; etc.

It's hard to behave in lovely ways when life throws you a giant curve ball and you find yourself short on (external or internal) resources.

Sometimes life goes to shit, and a landlord might experience some of the side effects of that. It's no one's fault, but it's something a landlord need to be prepared to respond to.

SnufferBottle

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Re: Tell us about your first rental property!
« Reply #43 on: October 04, 2017, 11:26:48 PM »
Transaction details (price / financing / closing costs / repairs / rent)?

$181k / 20% down / closing paid by seller / no major repairs / $18k/yr

Type of property / Yr of purchase / geographic market?

Vacation home/ski condo - summit county, CO 2015

Deliberate purchase of a rental property, or "accidental landlord"?

Deliberate but had no idea what I was doing, after it somehow worked out realized real estate was incredible.

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?

Yes

Self managed or get a property manager?

Property manager all the way. OPM + OPT = true leverage


Do you still own the property?

Yep, it cashflows even when I use it 30+ days per year for my own purposes

Overall, how'd you do?

Great! Cash flows, gives me a $6k writeoff per year, 200% ROI in 2 years thanks to buying at a great price

Are you still involved in real estate?

Yep - will be until I'm on the other side of the grass.

Any advice you want to pass on to newbies?

Just buy something! I hear too much about people sitting around all day waiting for the "perfect deal". Guess what - the perfect ones don't call out to you, you see the potential and make it work.

zephyr911

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Re: Tell us about your first rental property!
« Reply #44 on: October 05, 2017, 01:18:34 PM »
Got out of the USAF in the spring of 2006. Bought a shitty old house in Mobile for $34K to live in, 10% down, 10% interest, $350 monthly payment. Put almost $20K into improving it, lived there for a few months and had no work so I moved 350 miles north to Huntsville.

Simultaneously, some neighbors who I liked & had hung out with several times now had issues with their landlord - the dumbass got foreclosed after cashing their rent checks but not paying his mortgage - and rented my place for $500 or something.

They lived there for about year, left it a huge mess of dirty clothes and rotten food. I was living 350 miles away, working even farther away, going through a separation, and broke as hell, so I advertised on Craigslist for someone to live in it for free if they'd fix it up for me and start paying rent later.

I ended up with a recent college dropout (probably due to drugs) who I later learned brought in a gang of friends, got high and got in trouble with the local police for a few months, wrecked my place and disappeared. I mean, knocked holes in the walls and destroyed the cabinets I had bought new and slaved over for days.

Then a second neighbor moved in, same deal, fixed a few things, paid a few months rent, lost their job, moved out.

Tried the free/fix thing one more time, and once again we never got to the point of payment. This final guy answered emails for months when it turned out he had already left, which was insult to injury for me.

At this point, I called a friend living in the area and had her negotiate a surrender in lieu of foreclosure, and the local company that had both sold it to me and financed it took it back for the remaining balance, still $30K+.

Never again will I be an accidental landlord, nor will I do long distance without paid professional management.

My ass still hurts when I think about this experience.
I am not a cog. I am an organizational lubricant.

tralfamadorian

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Re: Tell us about your first rental property!
« Reply #45 on: October 05, 2017, 03:51:56 PM »
Transaction details (price / financing / closing costs / repairs / rent)?

$425k- 25% down, 3.5% interest, very long term amortization with private loan- zero repairs- $3k rent

Type of property / Yr of purchase / geographic market?

Condo- 2012- coastal SE A+

Deliberate purchase of a rental property, or "accidental landlord"?

Purchased for personal seasonal use then mid term corporate rental otherwise

Did it cashflow (after accounting for things like maintenance, repairs, vacancy, etc)?

Cash neutral with a couple months of personal use. Cash positive for years we decided not to go.

Self managed or get a property manager?

Property manager.

Do you still own the property?

Yes!

Overall, how'd you do?

Overall, well.  Even on cash flow neutral years, the tax savings through depreciation are impressive.  Like many other properties bought during this time period, the appreciation has been amazing.  The numbers would not have worked without the private loan (it's a long story).

Are you still involved in real estate?

Yep, still actively evaluating and purchasing when properties that fit my criteria are available.

Any advice you want to pass on to newbies?

Throw that percentage bullshit out the window and run the actual numbers for your target areas.  Shortcuts don't work. 

zephyr911

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Re: Tell us about your first rental property!
« Reply #46 on: October 05, 2017, 05:10:00 PM »
Oh, and I'm now running two rental partnerships and actively recruiting new investors to share the returns. Strength in numbers can work well.
My advice is to only do this if you know you really want to, and plan on everything costing more and taking longer than your best estimate until you've done it for a few years.
I am not a cog. I am an organizational lubricant.